Liquor Makers Oppose Substantial Excise Tax Hike, Warn of Illicit Trade, Revenue Loss

LIQUOR manufacturers on Thursday opposed substantial increases in excise taxes on their products, warning that higher rates could hurt legitimate businesses, reduce government revenues, and encourage illicit trade. At a House of Representative Committee on Ways and Means hearing, Distilled Spirits Association of the Philippines (DSAP) President Olivia Limpe-Aw urged lawmakers to retain the existing excise tax structure under Republic Act (RA) No. 11467, which already increased rates on distilled spirits. “DSAP respectfully recommends the retention of the existing RA 11467,” Ms. Limpe-Aw told lawmakers. Ms. Limpe-Aw also argued that the existing 22% ad valorem component should be considered in assessing the industry’s overall tax burden, rather than looking only at the specific tax. Citing Congressional Policy and Budget Research Department estimates, she said demand for distilled spirits has an elasticity of about -1.003, meaning a 1% increase in taxes could result in roughly a 1% decline in volume. She warned that uniform specific tax increases could impose a larger percentage price shock on lower-priced and mainstream products, making the measure more regressive. Department of Finance (DoF) Undersecretary Karlo Fermin S. Adriano defended the proposed tax increase, saying distilled spirits are undertaxed relative to beer when measured against alcohol content. The DoF is proposing to increase the excise tax on distilled spirits from P74.16 per proof liter in 2026 to P157 in 2027, with annual indexation of 6% thereafter. Alcoholic Beverages Alliance of the Philippines, Inc. representative Marvin Jason Bayang likewise opposed a “substantial and abrupt increase” in the specific excise tax on spirits, warning that it could encourage illicit trade and put greater pressure on legitimate businesses. San Miguel Brewery representative Andrei Kasilag also urged lawmakers to ensure that any tax increase is “fair, equitable, and reasonable,” saying drastic increases in beer excise taxes historically had a significant negative impact on sales volumes. — Pexcel John Bacon